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Conditional Orders: A Must-have to Tame the Bull.

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Being a trader who trades in the derivatives segment of the market, I try and do a lot of my analysis overnight. Before the market opens the next morning, I place triggers for my trade entries & exits. The idea of automating my orders works very well for me as I am working as a Business Analyst (BA) in a major IT firm.

Over the past few months, due to a sudden increase in my work assignments, this arrangement has posed a few obstacles for me. Trading has taken a backseat as I am unable to monitor the market regularly and modify my triggers whenever it is needed. Many times my ‘trigger orders’ suffer due to noises in the market, low liquidity or large spreads. Hence I have paused my trading on days of high workload in my job.

I had an opportunity to work as a BA on a conditional order system recently, that we were developing for a leading financial corporation in the US. While working on it, I could envision the value that the system could provide to retail traders like me. One of the features of the system enables traders to place trigger orders in option contracts based on the underlier’ s price. Since the triggers are placed on the underlier, problems of large spreads and low liquidity are being tackled effortlessly. Additionally, on important macroeconomic event days, another feature of the system – contingent orders; helps in placing all my orders based on the index’s reaction to the event.

The conditional order system developed has Trailing Stop order, Bracketed order, One Triggers Other order, One Cancels Other order and Contingent order. During my initial days of trading as a day trader, I would have loved to have a trailing stop loss, which would have been a blessing for any intraday trader to lock his profits whenever realized and stop out in the case of adverse market event. The bracketed order would be ideal for a trader, who trades based on risk-reward ratios in any trade. A trader can define his exit on the profit side and also have a stop loss in case of a loss at the pre-order stage. He can also blend it with trailing stop-loss orders to place an advanced form of bracketed order by replacing regular stop loss order with trailing stop loss. One Triggers Other order and One Cancels Other orders take a trader a step closer to algo trading. These orders can be used in multiple areas like risk mitigation, margin adherence and locking profits. It’s one of the aspects to the system that I would love to experiment and fine-tune my existing strategies.

The conditional order system is definitely a value add to any trader who trades in multiple stocks or commodities or any other asset and for a trader, whose primary job is not trading. With such a system being in place, a lot of problems of traders like me will be resolved. It will also help part time traders to focus on their primary jobs without having to sacrifice trading. With many brokerages in the US already embracing the idea, I have to admit that I have been eagerly waiting for my broker to implement the system.

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